Recently, New York State Assembly Speaker Sheldon Silver finally pushed for a bill that raises the minimum wage in the state from $7.25 to $8.50. This higher minimum wage is essentially the same as the 1980s rate of $3.10/hour, after it’s adjusted for inflation. If the bill manages to pass through the Republican-controlled Senate, it will give New York one of the highest minimum wages in the nation.
The State Legislature should sign the bill, but only after certain provisions are made. As opposed to indiscriminately raising the minimum wage for all workers, the bill should create a detailed tier that only requires wealthier enterprises to pay $8.50/hour — that way, they can appease small businesses that argue that minimum wage hikes kill jobs and make it harder for more qualified workers to earn higher wages than the next guy.
It is no secret that increasing the minimum wage — or the entire existence of a federally set one for that matter — invites a range of academic and political debates. Will it lead to fewer jobs? Will employers offset the cost of higher wages by increasing prices and cutting back on services? Or will consumer spending in the local economy increase when money is transferred from the safes of companies that sit on profits to the hands of the 40% of New York families that are supported by a single income of less than $10/hour?
All of which, and more, are valid reasons to proceed with caution. However, I fear that such an approach falls in line with the same errors as the vague blanket concept of “taxing the rich.” Missing from the discussion is a detailed wage scheme that is tailored to certain companies based on their location and net income, and tailored to employees based on their age and prior experience. If the state legislature, and other state governments dealing with the same issue, draft a detailed bill taking these factors into account, then small businesses and low-income households can both keep their heads held high.
This isn’t without precedent. Prior to the $7.25 minimum wage that was set by the federal government in 2009, Minnesota had an ideal wage scheme. Larger enterprises that grossed $625,000 or more were required to pay a minimum of $6.15/hour, while small enterprises were given a $5.25/hour minimum wage. There was also a $4.90 training wage for employees under the age of 20. After 90 consecutive days of employment with a company, they became eligible for the higher minimum wages. Meanwhile, Minnesota has enjoyed lower unemployment rates than the national average in 401 of the 412 last months (or 97.3% of the time since 1976).
Another ideal approach is for the location of companies and the cost of living in the surrounding residencies to be taken into account. By no coincidence, 6 of the 8 states that have a minimum wage above $8.00/hour are among the 15 states with the highest cost of living in the nation — most are either located in New England or on the West Coast. In NYC’s case, it’s hard to imagine why one of the most costly cities in the world maintains a low minimum wage. But also missing from this discussion is the huge discrepancy in the cost of living between cities in the same state. Obviously, $10/hour at a fast-food chain in Rochester, NY is worth more than $10/hour in New York City. Unfortunately, a federally set minimum wage virtually axes out all considerations of location.
But it is still possible to partially adopt Minnesota’s old model by exclusively enforcing the $8.50 minimum wage on large corporations like McDonald’s (which made $4,946.3 million in net income in 2010 and 11% earnings per share) while allowing smaller enterprises to maintain a $7.25/hour rate. It is simply unfair to expect a mom-and-pop business to pay the same rates as a large company, and it is unjust for larger enterprises to maintain low wages as their profits continue to expand. Although a higher minimum wage is not an ends-and-means to a stronger economy and better living conditions (D.C.’s $8/hour minimum rate and 10.4% unemployment is a case and point), it can close income gaps and improve living conditions if it is individually tailored to the workforce, businesses, and cost of living in a particular locale. But first, Assembly Speaker Silver and others need to recognize how vague and ineffective it is to vouch for higher wages while ignoring every other integral factor.
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